U regents hear of several serious violations of spending rules by athletics department

An internal audit at the University of Minnesota's athletic department found serious violations of university policy on spending, including tens of thousands of dollars on alcohol, parties and expensive hotels, during Norwood Teague's three-year tenure as athletic director.

But a team of outside investigators found little evidence of sexual harassment in the department beyond the scandal that triggered Teague's abrupt resignation this summer.

"By and large, the athletics department reflects the respect toward women that Minnesotans expect from this flagship educational institution," said Karen Schanfield, an attorney who headed the external investigation. Both reports were presented to the Board of Regents at a special meeting Tuesday.

University officials expressed relief at the findings that sexual harassment was not the problem some feared when Teague resigned after he was accused of sexually harassing two top administrators in July.

But chief auditor Gail Klatt said the audit showed that the department needs "a stronger culture of financial control."

The audit found that questionable or improper spending decisions by Teague and other senior members of the department cost the U more than $200,000.

The largest was a deal that Teague struck to give Major League Baseball free use of TCF Bank Stadium to host a concert, which cost the U at least $128,229 in lost revenue, the audit found. In exchange, Teague received use of a suite at the 2014 All Star game and 50 tickets. "Assuming 50 people attended the MLB event, the cost was $2,565 per ticket," the audit notes.

The audit also found that senior leaders in the athletics department had inappropriately spent more than $51,000 on alcohol, and thousands more on parties, clothing and hair stylists. Many expenditures were coded as "entertainment and gifts" rather than alcohol, getting around a policy that bars payments from athletics funds for booze.

"The average Minnesotan would look at those expenditures and say, 'Really?' " said Regent Laura Brod. "Some of these things are just a matter of judgment, and there is no training for common sense."

President Eric Kaler said he would present his initial response and a timeline for responding to the reports at the regents meeting Friday.

Joe Dixon, a former federal prosecutor who helped lead the sexual harassment review, told regents that his team found "isolated episodes," but no systemic mistreatment of women. Dixon said the U received 11 complaints regarding sexual harassment and Teague or other leaders, but most of them were vague and unsubstantiated.

Their report, posted on the Board of Regents' website, said that "a few individuals reported that Teague and other senior leaders engaged in limited sexual banter and other communications that they found offensive." But overall, it said, that "was not a regular occurrence within the Athletics Department."

The investigators also said they "found no evidence that the University had knowledge of anything inappropriate about Teague's conduct toward women before the Senior Leadership Retreat." They did, however, recommend that the U make it mandatory for all employees to report suspected sex harassment.

The lawyers said their team interviewed more than 100 individuals, and examined more than 250,000 pages of documents as part of the investigation, which cost $690,000. Teague declined to be interviewed, Dixon said.

Teague's lawyer, Bill O'Brien, issued a statement saying: "Today marks the end of what has been an extended feeding frenzy involving Norwood Teague."

He added that the university deserves to be commended for its examination of the athletics department.

"Norwood has always believed that a fair and objective review of his tenure as athletic director would reaffirm the positive environment he maintained in the Athletics Department for all coaches, staff and student athletes," O'Brien said.

"The report largely clears the university, and it largely clears Norwood Teague," he said. "To the degree there are issues raised in the financial audit, the audit itself notes that those are largely about the culture surrounding big-time athletics, a culture that existed long before Norwood came to the university and that will likely last long after."

Interim athletic director Beth Goetz said in a response to the reports that the new leadership was undertaking reforms.

Klatt said the U is seeking $6,668 in reimbursement from Teague and $433 from Mike Ellis, one of Teague's top aides who resigned Nov. 6 as senior associate athletic director after the university began investigating several anonymous complaints against him.

Ellis said that he "did nothing wrong," and that the investigation resulted in no disciplinary findings.

Dean Johnson, chair of the board of regents, noted that the audit found about $289,000 in questionable spending, out of an athletics budget of $107 million. "That's two-tenths of 1 percent," he said. At the same time, he said the audit would help improve the athletics department. "Any time an institution or a ship takes a scud, which we did, there's damage," he said. "But we are in the process of repairing that damage."

Separately, the report faults the university's handling of two incidents of sexual harassment involving student athletes. In one case this year, the report found, nine student athletes violated school policy "by repeatedly and deliberately" providing false information to university investigators about a report of sexual harassment. One student athlete "physically threatened and intimidated" the woman who made the complaint, according to the report, and a staff member made "at least one false statement" about the incident.

The U's internal audit criticized Teague for circumventing contracting rules in hiring Mary Ruth Burton, a management consultant he knew from his former job at Virginia Commonwealth University. Her company got five separate contracts worth $139,232.

Teague also agreed to a deal with Learfield Communications Inc., which runs Gopher Sports Properties, to pay two unidentified senior members of the athletics department for radio interviews on football and basketball that were previously considered part of their jobs. Learfield deducted those payments ($15,000 and $20,000 a season, respectively) from its contractual payments to the athletics department.

"Therefore the university was actually fully funding the cost of this additional compensation," the audit said, concluding that the payments "bypassed institutional checks and balances and lacked transparency."

The audit criticized an event closely associated with Ellis known as the Nike Villa 7 Consortium, which essentially serves as an annual, nationwide recruitment meeting for university basketball coaches. The U spent $147,259 on Villa 7 between July 2012 and August of this year.

The audit noted that Teague sometimes submitted his expenses through subordinates; when they submitted their expenses, he approved the expenditure himself, getting around a review by Kaler's office.

Kaler said Tuesday that the U has severed ties with Burton and Villa 7 and eliminated the payments to athletic staff for radio interviews.

The audit criticized a number of expenditures Teague authorized. It cites a December 2013 event in which the U paid for lodging for "one official" at the Waldorf-Astoria Hotel in New York. The room cost $663 a night, "well in excess of the allowable university limit."

The receipt shows that the U paid $6,658 for lodging. Teague attended, with four donors: Mark Kravik, Lee Sundet, Bill Kelly and Kevin Harris.

"We also observed multiple instances where meal costs were paid for with university funds that were contrary to university policy and practices. These include: paying for the expenses of a guest who has no official university purpose in attending, reimbursing employees not in travel status for meals and/or alcoholic beverages with fellow employees (during or after normal business hours), and paying for meal expenses for meetings held with university consultants and vendors," the audit says.

maura.lerner@startribune.com 612-673-7384 emma.nelson@startribune.com 952-746-3287

dbrowning@startribune.com 612-673-4493